Stephen LaRoque’s personal attorney testified in federal court this morning, telling jurors he warned LaRoque against filing a defamation lawsuit unless LaRoque was sure there was no truth to the allegations of self-dealing.
“He said he had nothing to hide,” Bert Diener said about LaRoque.
On the stand Thursday, Diener said he was unaware at that time of $300,000 worth of checks that LaRoque had written from his federally-funded non-profit to his own business in the months before filing the defamation lawsuit.
Those checks are at the heart of the criminal charges facing LaRoque, 49, a Kinston Republican that stepped down from the N.C. House of Representatives following his indictment last July. Federal prosecutors believe LaRoque, in addition to generous annual salaries of up to $195,000 from the small non-profit, stole $300,000 from federally-funded economic development non-profits, East Carolina Development Company and Piedmont Development Company. He’s accused of using the bank accounts of the non-profits to support a lavish lifestyle, including buying cars, expensive jewelry and replica jewel-encrusted Faberge eggs for his wife and a Greenville ice-skating rink.
LaRoque, who has pleaded not guilty, faces more than 90 years in prison if convicted of all 12 charges he faces.
The non-profits had received more than the U.S. Department of Agriculture as part of a rural lending program that was supposed to combat poverty by offering loans to small businesses that traditional banks had shunned.
LaRoque’s indictment followed an August 2011 N.C. Policy Watch investigation (click here  to read) that questioned LaRoque’s high salaries, as well as the non-profit’s board consisting of LaRoque’s immediate family members. The investigation also found that USDA had fallen down in its own lax requirements of supervising the non-profit, skipping several years of site visits to the non-profits.
LaRoque’s brother Walter LaRoque testified earlier this week, telling jurors that he was unaware of what Stephen LaRoque was getting paid while serving on the boards of the non-profits.
The trial began May 20 at the federal courthouse in Greenville and is expected to carry through to next week, when LaRoque’s attorneys will present their defense.
Joe Cheshire, LaRoque’s criminal defense attorney for the trial, has said that the USDA rules were confusing and, at times, contradictory and that the money in question was owed to LaRoque for work owed to the former lawmaker.
Diener had lots of business involvement with LaRoque, whom Diener described as his biggest client. In addition to representing LaRoque and his campaign in a defamation lawsuit LaRoque filed against his political opponent Democrat Van Braxton, Diener also did work for the economic develop non-profits LaRoque ran and for other members of LaRoque’s family.
He also got a business loan to expand his non-profit from East Carolina Development Company, the non-profit that was tasked with loaning out USDA money to businesses in struggling rural areas.
Diener credited the $100,000 in business loans he received from East Carolina Development Company with allowing him to expand his law practice and employ more than two dozen people in Eastern North Carolina.
“If they gave me more money, I could create more jobs,” Diener said.
Jurors also learned that the Diener’s fees for the defamation lawsuit, filed a month before the 2010 election, was mostly paid for by East Carolina Development Company, which is funded solely with the USDA rural lending money. The non-profit was held in contempt by a Kinston-based Superior Court judge and fined $17,250 for not turning over records to attorneys for Van Braxton, the Democratic opponent LaRoque sued.
The remainder of the lawsuit’s fees were paid by LaRoque’s campaign, Diener said.
Braxton’s campaign had put out a campaign flier featuring Bruce Patterson, a well-known Kinston barbecue pitmaster that accused LaRoque of stealing his home and business after the East Carolina Development Company foreclosed on him in 2006.
Diener also talked on the stand about how he was worried that federal prosecutors may come after him, telling jurors about a confrontation he and U.S. assistant attorney Dennis Duffy had during Diener’s 2012 grand jury testimony.
“When he (Duffy) and I butted heads, it got very heated,” Diener said.
His business was also contacted by the IRS in April and informed the federal tax agency would audit him, and specifically asked about records related to LaRoque, he said.
Testimony in the case will continue this afternoon.